Once again, the diagram illustrates three houses, but with land values now ranging from $0.25m to $5m. The real rate of growth in land values is now assumed to continue at historical rates of 3.5%. The tax liability will consequently be far greater than in the previous examples considered. Indeed, it will quite frequently exceed the property’s total land value. In such cases, optimising agents will presumably defer tax payment until death, at which time the government appropriates the entire land value, but (perhaps) not the liability in excess of the land’s value. This highlights an important difference between a wealth tax and a land tax. A wealth tax is a ‘stable’ tax instrument, whereas a land tax can be ‘explosive’. With a wealth tax, as the tax starts to bite, the level of wealth falls. This in turn induces lower average rates of tax, so that the level of wealth eventually stabilises at some lower equilibrium. With a land tax, as the tax starts to bite (eg $X per period), the level of wealth falls. But this time, even though the level of wealth is falling, required tax payments do not fall, because the land value is not falling! Eventually, real wealth can fall to zero, but the land tax keeps on biting: the same tax payment ($X) or more must still be paid each period.
A21: Land Tax – Australian States and Territories, 2001-02
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All Australian states levy Land Tax on the unimproved value of commercial and industrial land. In New South Wales, a flat rate of tax (1.7%) is applied above a certain threshold while in other States marginal rates are imposed.
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New South Wales has the highest tax-free threshold for Land Tax of any of the Australian states. In New South Wales, properties must be valued at $A220,000 or over before land tax is applicable, compared to $A125,000 in Victoria. In Queensland, there is no tax-free threshold although a 15% rebate applies. The tax-free threshold in New South Wales is indexed annually to the estimated increase in state-wide land values for commercial, industrial and residential properties.
The table below shows that for businesses occupying land valued at $A10 million, the Land Tax payable in New South Wales is far lower than that of the other states, with the exception of Queensland, where the impost is comparable.
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Land Tax – Australian States and Territories, 2001-02
NSW (1) Vic Qld (2) WA (3) SA Tas NT ACT
Tax-free threshold ($A) 220,000 125,000 0 10,000 50,000 999 Not imposed 0
Average tax ($A) on taxable value of:
$50,000 Nil Nil Nil 150 Nil 313 – 500
$1 million 13,360 6,230 10,638 10,282 12,425 21,113 – 12,500
$10 million 166,360 419,880 151,470 236,783 345,425 246,113 – 150,000
Sources: Interstate Comparison of Taxes 2001-02; NSW Treasury, November 2001.
1 New South Wales increased the tax-free threshold for land tax to $A220,000 on 1 January 2002. The threshold is indexed annually to estimated increases in state-wide land values for commercial, industrial and residential properties. From 31 December 2001, the tax-free threshold for places of principal residence was increased to $A1,414,000.
2 Queensland figures are calculated for business and include a general 15% rebate payable to all land tax payers.
3 Includes the Metropolitan Region Improvement Tax in Western Australia, which is levied on the unimproved value of land situated in the metropolitan region at the rate of 0.15c per $1.
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Land tax 2003 thresholds
The tax-free threshold for 2003 is $261 000. This is up from $220 000 in 2002 a rise of 18.6%.
You may be liable if the value of land you own, other than land used and occupied as your principal place of residence, has a total value of $261 000 or more as at 31 December 2002.
Premium property tax for the 2003 tax year only applies to principal places of residence where the land value is equal to or greater than $1.680 million, up from $1.414 million in 2002, an increase of 18.8%.
Land tax rate
The land tax rate for 2003 land tax year is 1.7 per cent.
Notice of assessement
The land tax notice of assessment you will receive will contain full details of all land held including exempt land and any unpaid land tax you may be liable for from previous years on the one statement. You will also receive a support schedule detailing this information.
You should check all the information on your notice of assessment. If you believe there is an error or some details are not correct, you should send us a variation return or telephone us for assistance.
Early payment discount
A 1.5 per cent discount is offered for full payment of your land tax if it is paid within 30 days which is also the first instalment date. The discount does not apply to overdue amounts, interest or penalty tax.
Pay by instalments
You can pay by three instalments but this does not allow for a discount. Your first instalment payment will include any overdue amounts, interest or penalty tax. You should be aware if the first instalment is not paid in full by the due date, your whole assessment becomes payable.
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Help if you need extra time
If payment of a land tax assessment will cause you serious financial hardship, you can make an application to extend or defer payment.
Premium property taxpayers who hold a Pensioner Concession Card or Seniors Health Card can apply to have payment deferred indefinitely.
The interest on deferred premium property tax is charged at the rate of the Consumer Price Index (CPI). See Australian Bureau of Statistics
How valuations are made
Valuations for land tax are made every year on 1 July preceding each land tax year.
These values should not be confused with those made in the normal cycle of business such as valuations provided to local governments for rating purposes.
Your land tax liability for 2003 is based on all liable land held at midnight 31 December 2002.
Land tax 2003 thresholds
The tax-free threshold for 2003 is $261 000. This is up from $220 000 in 2002 a rise of 18.6%.
You may be liable if the value of land you own, other than land used and occupied as your principal place of residence, has a total value of $261 000 or more as at 31 December 2002.
Premium property tax for the 2003 tax year only applies to principal places of residence where the land value is equal to or greater than $1.680 million, up from $1.414 million in 2002, an increase of 18.8%.
Land tax rate
The land tax rate for 2003 land tax year is 1.7 per cent.
Notice of assessement
The land tax notice of assessment you will receive will contain full details of all land held including exempt land and any unpaid land tax you may be liable for from previous years on the one statement. You will also receive a support schedule detailing this information.
You should check all the information on your notice of assessment. If you believe there is an error or some details are not correct, you should send us a variation return or telephone us for assistance.
Early payment discount
A 1.5 per cent discount is offered for full payment of your land tax if it is paid within 30 days which is also the first instalment date. The discount does not apply to overdue amounts, interest or penalty tax.
Pay by instalments
You can pay by three instalments but this does not allow for a discount. Your first instalment payment will include any overdue amounts, interest or penalty tax. You should be aware if the first instalment is not paid in full by the due date, your whole assessment becomes payable.
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Help if you need extra time
If payment of a land tax assessment will cause you serious financial hardship, you can make an application to extend or defer payment.
Premium property taxpayers who hold a Pensioner Concession Card or Seniors Health Card can apply to have payment deferred indefinitely.
The interest on deferred premium property tax is charged at the rate of the Consumer Price Index (CPI). See Australian Bureau of Statistics
How valuations are made
Valuations for land tax are made every year on 1 July preceding each land tax year.
These values should not be confused with those made in the normal cycle of business such as valuations provided to local governments for rating purposes.
Your land tax liability for 2003 is based on all liable land held at midnight 31 December 2002.
Land Tax Marginal Rates for 2002-03
The land tax marginal rates that apply to residential properties in
2002-03 are as follows:
AUV $100,000 or less 1.00%
AUV from $100,001 up to $200,000 1.25%
AUV of $200,001 and above 1.50%
The land tax marginal rates that apply to non-residential properties from 1 October 2002 are as follows:
AUV $100,000 or less 1.00%
AUV from $100,001 up to $200,000 1.40%
AUV of $200,001 and above 1.70%